It is our strong view that hedge funds can add significant benefits in terms of risk/return profile, volatility and diversification to any institutional portfolio or to the portfolios of very high net worth individuals. However, it’s no secret that poor performance currently plagues the industry, which has too many funds and strategies that ultimately disappoint.

Recent news of a significant drop in new fund launches and a slowdown in overall net allocations is a welcome sign. But will these be enough to solve the current predicament? Is hedge fund oversupply truly the main issue?

It is one of them. However, there are two other issues that are equally to blame for the current hedge fund malaise: the lack of unique and differentiated product, and the relentless focus on liquidity.